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FSU Immigrants in Canada: a Case of Positive Triple Selection?

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FSU Immigrants in Canada: a Case of Positive Triple Selection? IZA DP No. 4410 FSU Immigrants in Canada: A Case of Positive Triple Selection? Don DeVoretz Michele Battisti September 2009 DISCUSSION PAPER SERIES Forschungsinstitut zur Zukunft der Arbeit Institute for the Study of Labor FSU Immigrants in Canada: A Case of Positive Triple Selection? Don DeVoretz Simon Fraser University and IZA Michele Battisti Simon Fraser University Discussion Paper No. 4410 September 2009 IZA P.O. Box 7240 53072 Bonn Germany Phone: +49-228-3894-0 Fax: +49-228-3894-180 E-mail: [email protected] Any opinions expressed here are those of the author(s) and not those of IZA. Research published in this series may include views on policy, but the institute itself takes no institutional policy positions. The Institute for the Study of Labor (IZA) in Bonn is a local and virtual international research center and a place of communication between science, politics and business. IZA is an independent nonprofit organization supported by Deutsche Post Foundation. The center is associated with the University of Bonn and offers a stimulating research environment through its international network, workshops and conferences, data service, project support, research visits and doctoral program. IZA engages in (i) original and internationally competitive research in all fields of labor economics, (ii) development of policy concepts, and (iii) dissemination of research results and concepts to the interested public. IZA Discussion Papers often represent preliminary work and are circulated to encourage discussion. Citation of such a paper should account for its provisional character. A revised version may be available directly from the author. IZA Discussion Paper No. 4410 September 2009 ABSTRACT FSU Immigrants in Canada: A Case of Positive Triple Selection?* This paper investigates the economic performance of immigrants from the Former Soviet Union (FSU) countries in Canada. The contribution of this paper lies in its use of a natural experiment to detect possible differential labour market performances of Soviet immigrants prior to and after the collapse of the Soviet Union. In short, the collapse of the former Soviet Union allows an exogenous supply change in the number and type of FSU immigrants potentially destined to enter Canada. For this purpose, Census microlevel data from the 1986, 1991, 1996 and 2001 Canadian Census are utilized to estimate earnings and employment outcomes for pre- and post-FSU immigrants. JEL Classification: J61, F22 Keywords: immigration, integration Corresponding author: Michele Battisti Department of Economics Simon Fraser University 8888 University Drive Burnaby, BC Canada E-mail: [email protected] * We note with appreciation the copyediting services by M. Hayden of [email protected] and the financial support provided by the Research Authority, Ruppin Academic Centre, Israel. 3 Introduction The post-1990 rise in immigration in general to Canada and from two disparate formerly closed systems—the Soviet Union and China—may have led to profound changes in the paradigm of economic integration into Canada’s labour force. Prior to the collapse of the Soviet Union, potential Soviet émigrés could not decide to move to Canada based on an open and easily transparent exit system. Thus, immigrants to Canada from the former Soviet Union (hereafter FSU) were largely designated by Canada as refugees and many came ill-equipped in terms of country-specific human capital to readily integrate into Canada’s labour market. Figure 1 Source: LIDS (Landed Immigrants Data System) from IMDB Immigration Database Figure 1 illustrates this point graphically. From 1980 through 1991 the distribution of FSU immigrants across entry gates was as follows: 58% refugees, 14.1% family class and 27.5% skilled class. 1 By the year 2000, refugees made up only 13.9% of the entrants with 63.9% of FSU immigrants now appearing in the skilled group. In short, prior to 1992 FSU émigrés to Canada were only self-selected from the refugee portion of the potential pool of all FSU émigrés, while after 1992 FSU immigrants entered under a double selection system. 1 The skilled class potential entrant is assessed under a “points system” which yielded points for human capital attributes. 3 4 Figure 2 Source: LIDS (Landed Immigrants Data System) from IMDB Immigration Database Figure 2 illustrates the uniqueness of the exogenous shock to FSU immigrant flow circa 1992-2001 when all immigrants to Canada had only a 5.3% drop in the proportion of refugees whilst the FSU immigrant share of refugees fell by 44.1%. Thus, after the fall of the FSU (as with China circa 1995), immigrants who left the FSU were drawn from a larger pool of potential movers with a different set of observable human capital attributes. This important policy change in the FSU should ultimately reveal itself in differential labour force outcomes of FSU immigrants in Canada after 1991 if our thesis of positive selection holds. After 1991, the immigrants’ initial positive self-selection was combined with a second level of selection as these FSU émigrés were subjected to a “points assessment” system which favoured the admission of FSU immigrants with human capital. 2 Thus, looking at the labour market performance of FSU immigrants entering before and after 1991 has the potential of shedding light on the effectiveness of Canada's selection process. The final or third selection process arises when the immigrant decides to ascend to Canadian citizenship or to remain a non-citizen. 3 2 Pivnenko and DeVoretz (2003) note that a majority of Ukrainian immigrants to Canada came through non-economic entry gates prior to 1991. 3 Pivnenko and DeVoretz (2006) document the positive effect of citizenship status on the labour market outcomes of Ukrainian immigrants. 4 5 It should be noted that traditionally only a portion of “points-assessed” immigrants self- select into citizenship, yet almost all refugees naturalize given their inability to return home. Given that refugees often feel compelled to naturalize, some of the economic premium owing to citizenship is often lost due to adverse selection; those FSU émigrés who arrived after 1991, however, were largely not refugees and should reveal a positive selection into citizenship since they were not compelled to naturalize. 4 In fact, we argue that only those post-1991 FSU émigrés who acquired additional Canadian-specific human capital will tend to naturalize and reap the labour market rewards from acquiring this human capital. In sum, the following thesis is offered in terms of the labour market integration of émigrés from the FSU into the Canadian context: prior to 1991, émigrés from the Soviet Union to Canada were singly selected by themselves and after 1991 the new cohort of FSU emigrants to Canada were often selected three times. This triple selection procedure in turn implies that a greater human capital stock will be embodied in this post-1991 cohort and would lead to more rapid integration into Canada’s labour market in the absence of discrimination or other forms of labour market failure. It is the purpose of this study to test this thesis in the context of a “gap analysis” in terms of income and employment. The traditional immigrant earnings literature owing to Chiswick (1978) argues that upon entry, immigrants suffer an earnings deficit due to the absence of specific and general (language, knowledge of institutions) human capital attributes. It was inferred by Chiswick from census data that over time—generally 8 to 12 years—immigrants overcame these human capital deficits by investing in themselves and their earnings subsequently “caught-up” to and then perhaps surpassed their Canadian-born colleagues. 4 Pivnenko and DeVoretz (2006) verify this empirically for all Canadian refugees circa 2006 in Canada. 5 6 Figure 3: Idealised Age-Earnings Profile Figure 3 depicts the “gap” hypothesis from both optimistic and pessimistic viewpoints. Given our thesis of “triple selection” we would expect that Figure 1 would apply to highly skilled FSU émigrés to Canada since increased observable human capital attributes owing to triple selection should hasten the diminution in the earnings gap and may lead to its complete evaporation at X. Beyond X, in the optimistic case the immigrant now can overachieve with respect to their Canadian-born cohort’s earnings performance. However, if there exist “unobservable” factors which intervene in this process of labour market integration, the case of underachieving may arise. These “unobservables” include inhibitions on the immigrant’s desire to self-select into the labour market, employer discrimination of the immigrant’s human capital characteristics (i.e. foreign education) and discounting their foreign labour market experience. It is this “gap” framework as depicted in Figure 1 which will inform our labour market integration analysis given the triple selection thesis outlined above. It should be noted that FSU immigrants may achieve over- or under-achievement status depending on the presence or absence of unobservable factors. Literature Review Canadian literature on the economics of immigration provides an extensive empirical immigrant labour market integration (Reitz, 2001). The literature has largely focused on Canadian immigrant earnings’ performance in general but a series of in-depth studies based on the immigrants’ country of origin have recently appeared. Two major findings from the general Canadian immigrant earnings experience appear to date. First, an age 6 7 earnings profile analysis based on a human capital model
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